News from the property market frontline gets bleaker by the day. Today, a report from the council of Mortgage Lenders announced that 23,000 households are facing the prospect of negative equity. These homebuyers bought their properties between March 2007 and March this year, with 100% mortgages and, in some case with loans of up to 110$ of the value of the property.,

The Royal Instition of Chartered Surveyors has reported that the number of transactions per estate agent has slumped during the traditional "spring bounce". Almost every month we see reports that there are fewer and fewer first time buyers. Lending criteria have become much stricter and it is now impossible to get a mortgage without a substantial deposit.

Worse is still to come. Even with the major lenders recording successive falls in property prices over the last seven moths, houses are grotesquely overvalued by any conceivable definition and affordability is a fantasy for any but non-doms and the most financially illiterate.

Just as it finally dawned on speculators that dotcom companies were really worth only a fraction of their stockmarket values, so the veil has been lifted from the eyes of homebuyers. The three-bed semi you bought is not worth half a million pounds. You are not a property millionaire but, in fact, have bigger debts than your parents could ever have imagined. The two-bed buy-to-let flat you bought to fund your retirement is actually costing you several hundred pounds a month in subsidy to your tenants if, of course, you actually have tenants.

There are thousands of new build apartments ("flats" is an old fashioned word) lying empty in cities around the UK. The ones that do sell, often at auction, go for much less than the original purchase price. Properties are staying on estate agents' books for longer, and a backlog of unsold properties is growing. Many migrants are deciding to return home to their own booming economies, leaving more empty houses.

The signs could not be clearer. It is not the media talking Britain into a housing slump. The market is crashing because the figures do not add up, and have not added up for years. The only surprise is that we took so long to admit the truth about property.

It is not only the Labour government who are to blame for the mess we are in. although Gordon Brown did set himself up for a fall as calamitous as that in the housing market when he rashly promised no return to boom and bust.

Labour swallowed whole an economic theory dreamed up by rightwing free marketers in the UK and America. This theory insisted that regulation was an impediment to the efficient operation of the market, especially financial markets. Lending and credit restrictions, at the behest of the City, were relaxed by the Conservatives and become even laxer when Brown entered the Treasury.

When house prices shot up and continued to grow at breakneck speed, the government did nothing to intervene. Now, as prices fall, it is not the job of government to prop house prices. There is, however, a public interest in preventing a wave of repossessions which will lead to local and national taxpayers shouldering the cost of housing the new homeless.

Banks knew that they were lending to people who, to put it generously, were stretching themselves. Indeed, the banks devised "self-certificated" mortgages which were a licence to fraud. The public should not be expected to foot the bill for the decisions of banks and individual borrowers who should be shouldering the responsibility.

There is a very strong argument for social landlords to act as a buyer of last resort, to prevent a fire sale of repossessed property and to rebuild the depleted stock of social housing. Wouldn't "more council housing under a Labour government" be a positive pledge for the next election?

Vince Cable, the Liberal Democrat shadow chancellor, argues that house prices must be included in the Bank of England's remit to control inflation, to prevent future housing bubbles.

He also argues that we must introduce a new regulatory system that will prevent future booms and the inevitable busts that follow. In order to truly protect lenders and buyers, immediate action to improve regulation of the financial services sector is clearly overdue and absolutely necessary.

If Brown has the courage to turn current financial practices on their head, socialise profits and privatise losses, then he will deserve credit. The great global housing correction of 2008 is his big opportunity.